Uncertainty following the UK’s decision to leave the EU has had a “chilling effect” on fintech investment in Britain, according to a trade body.
New figures released by Innovate Finance, a non-profit members’ organisation representing over 250 British-based financial technology companies, showed that venture capital investment in startups fell to $783m in 2016 – a 33.7 per cent drop on the $1.2bn raised in 2015.
The dramatic decrease in fintech investment was attributed by Lawrence Wintermeyer, chief executive of Innovate Finance, to uncertainty surrounding Brexit.
Responding to the figures, Wintermeyer told the BBC that “our members tell us Brexit has had a chilling effect on investment”.
London’s reputation as a fintech powerhouse has been damaged since the referendum in June 2016 from a triple-threat of Brexit consequences.
Heavily reliant on the European talent pool of workers, tech startups would suffer from an end to freedom of movement. A post-Brexit London would lose EU-funded research opportunities and access to the European single market.
In an official statement, Wintermeyer outlined the priorities of the UK’s fintech community as the government undertakes its Brexit negotiations.
“The loss of passporting rights will hit fintech firms if special provisions to the single market are not negotiated upon leaving the union. However, maintaining and further improving access to global fintech talent has superseded passporting across the fintech community’s post-Brexit priorities.”
Figures saw China overtake the US for the first time as the leader in fintech investment, as venture capitalists signed deals totalling $7.7bn and $6.2bn respectively. Despite losing a third of its investment, the UK remained third.
With enthusiasm for UK startups among investors seemingly in decline, ambitious entrepreneurs have also been tempted to look elsewhere as Britain makes its exit from Europe.
In July 2016, Berlin senator Cornelia Yzer said that she had been approached by “over 100” UK startups that reacted to the referendum result by targeting a move to the German city, drawn to the cheap rates for housing and commercial space.
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